A buyer pays the bill, tax included, and keeps a proper invoice. Months later the Input Tax Credit is reversed, because the supplier who was paid never passed that tax to the Government. Section 16(2)(c) of the Central Goods and Services Tax Act ties the buyer's credit to the supplier's payment, which the buyer has no way to check. The portal shows the invoice, never whether the tax was paid. The fix that helps both sides chases the supplier who kept the tax, not the buyer who already paid it. Where in this chain does your exposure sit?
The law sets four conditions for claiming the credit. The buyer must hold a valid invoice, must have received the goods or services, the supplier must have actually paid the tax to the Government, and the return must be filed. The buyer can perform three of these. The fourth depends entirely on what the supplier does after it has been paid, and that is the condition Section 16(2)(c) enforces.
The buyer cannot check it because no screen shows it. The supplier declares its sales in one return, GSTR-1. That declaration creates the buyer's credit statement, GSTR-2B. The Invoice Management System, running since October 2024 and now backed by statute, lets the buyer accept or reject each invoice before claiming credit. All of these show what the supplier declared. None shows whether the supplier paid, because payment happens in a different return, GSTR-3B. A supplier can declare the sale and never pay the tax, and the buyer's screen looks clean either way. Every screen the buyer can see shows the supplier's declaration; no screen shows the supplier's payment, and the payment is the one condition the law enforces.
When the default surfaces, the notice goes to the buyer. The reason is practical. By that time the supplier is often untraceable, or has nothing left to recover. The buyer is registered, audited, and has money. The demand follows the money, not the fault; the compliant buyer is usually the easiest party to recover from, so that is where the notice lands.
The courts have started pushing back, in two directions at once. The Calcutta High Court in Suncraft Energy said the department must go after the defaulting supplier before touching the buyer's credit. The Tripura High Court in Sahil Enterprises kept the clause alive but limited it: it cannot defeat a genuine buyer in a genuine transaction, because no buyer can know in advance which sellers will collect tax and never deposit it. A different line of rulings says the credit is a concession and every condition is mandatory. The Supreme Court took up a challenge to the clause in early 2026. Until it decides, the outcome depends on which line your jurisdiction follows.
So a company protects itself before the invoice, not after the notice. At onboarding, it checks whether a vendor files its GSTR-3B on time, which is publicly visible even though invoice-level payment is not. In the contract, it keeps a tax indemnity and a holdback, releasing the tax amount only against proof of the supplier's filing. And when a notice still arrives, its first position is the one the Calcutta High Court gave it: recover from the supplier who kept the tax first, with Rule 37A available to restore the credit if that supplier later pays. **Until Parliament amends the clause or the Supreme Court settles it, the buyer's protection is built in the contract and at onboarding, not at the hearing."